European shares rise after Fed officials’ dovish signals

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European shares rose on Tuesday following gains in Asian markets as investors welcomed comments from Federal Reserve officials that suggested US interest rates may be nearing their peak.

Europe’s region-wide Stoxx 600 rose 0.3 percent in early trade, while France’s CAC 40 added 0.5 percent. They were helped by comments from Atlanta Fed President Rafael Biostic that inflation could return to target without raising rates further, and San Francisco Fed President Mary Daly said the Fed is nearing the “last part” of its cycle.

However, London’s FTSE 100 fell 0.4 per cent after data showed UK wage growth rose more than expected in the three months to May.

Evidence of labor market resilience to tighter monetary conditions means the pressure on (the Bank of England’s monetary policy committee) to keep raising rates in August will intensify, said Martin Beck, chief economic advisor at EY Item Club. A further hike in rates in September is now almost certain.

James Smith, developed markets economist at ING, said the Bank of England may be forced to opt for a massive half-percentage-point hike next month. “If there is any good news for policy makers, it is that there are signs that the UK labor shortage is becoming less severe,” he said.

Sterling strengthened 0.3 percent against the dollar and reached a 15-month high of $1.289. The two-year gilt yield, which closely tracks interest rate expectations, fell 0.09 percentage point to 5.272 per cent, however, as traders slightly lowered the level at which they expect UK rates to peak next year. But will be

Asian shares rose after Chinese officials said on Monday that measures designed to support the property sector would be extended until the end of 2024. Hong Kong’s Hang Seng index rose 1 percent, China’s CSI 300 rose 0.7 percent and South Korea’s Kospi rose 1.7 percent. Hundred. However, Japan’s Topix fell 0.3 percent.

Inflation and producer prices fell in June in the world’s second-largest economy, according to analysts at Liberum, suggesting that China’s post-lockdown recovery “was patchy at best and its growth story is faltering”.

Contracts tracking Wall Street’s benchmark S&P 500 were down 0.1 percent, while those tracking the tech-heavy Nasdaq 100 rose 0.1 percent ahead of the New York open.

The moves come ahead of fresh consumer price inflation data on Wednesday, which is expected to show headline inflation was 3.1 percent in June year over year, according to economists polled by Bloomberg.

Additional reporting by Mary McDougall in London